by Rick Willeford, MBA, CPA, CFP, PFS
Welcome to our 2009 fee analysis. This is the most significant and comprehensive fee analysis that Dental Economics® has ever done, with data gathered from more than 22,000 practitioners! In addition to raw quantity, we have a special treat — you can go online, tap into this database, and get selected fee information for the first three digits of your zip code!
This quantum leap in the depth of our data is primarily due to the Academy of Dental CPAs (www.ADCPA.org) collaborating with Henry Schein Dental Company (www.HenrySchein.com) to “data mine” over a million transactions in their EZ Dental and Dentrix e–file claims. In addition, over 4,000 actual surveys gathered by Schein field sales consultants (as part of their customer “Practice Analysis Tool”) and from the ADCPA were added to the mix.
We have arranged the fees by eight regions. Within each region, the fees are presented for the 30th, 50th, 70th, and 90th percentiles. The fee for the 30th percentile means that 30% of practitioners charged that fee or less, and 70% charged more than that fee. You may recall that the 50th percentile is also the “median” fee. The median fee is more useful than the “mean” or average fee. A few extremely large — or small — “outliers” can distort the mean figure. On the other hand, the median fee is unchanged by outliers. It is simply the figure that 50% of practitioners charge less than and 50% charge more than.
In spite of this huge database, you have to recognize the limitations inherent in any “global” analysis. The regions comprise large cities, rural areas, and all points in between. For instance, we observed that the overall 90th percentile figures are typically equal to the 50th percentile for large cities, and probably even lower for major metropolitan areas.
However, these global figures do show you variations between regions. Also, regardless of the actual percentile your own fees fall into, you should be concerned if your fees are unbalanced, meaning that all your fees don't generally fall in the same percentile.
Finding fees by zip code
To go from the global to the “specific,” Henry Schein Dental has graciously teamed up with the ADCPA and Dental Economics® to allow you to go to the new Fee Analyzer on the DentistryIQ Web site (www.dentistryiq.com) and enter the first three digits of your zip code to get specific fees for your area.
However, remember, there is more to optimizing the fees for your practice than simply comparing yourself to fees charged by other dentists in your area. In addition to proper fees, your revenues also depend on which procedures you do, the relative number of procedures you do, and the proper coding of those procedures. (See “Wrong Fees”on pae 14.)
So, to really set your fees properly for your dental practice, to balance your procedure mix, and to be sure that you bill for and code your services properly, you would be well–served to seek outside help.
Most full–service dental consultants provide some or all of those analytical services. In addition, you may not realize that Henry Schein Dental invests in a continuing–education program that provides its managers and field sales consultants with the tools necessary to complete an in–depth fee and practice analysis for their clients.
Insights on setting fees
To add some insight into other issues and the general angst surrounding the topic of fees, I have asked two of our new partners in The Willeford Group to chime in. Jennifer McDonald, managing partner of our Dental Management Advisors, LLC, has a broad range of experience, ranging from managing a progressive fee–for–service practice as well as a major franchise operation. She owned her own technology company, where she had to manage her own fee structure, and she has been a management consultant for a number of years.
Jennifer warns you to be alert to the following ancillary issues:
1) Loss leaders. Avoid the inclination to keep the fees for exams, radiographs, and prophies artificially low, hoping that will attract and keep patients. Patients are not talking about your fees as much as you are afraid they are! With good communications skills, raising those fees to keep them in line with the restorative services typically go unnoticed ... and may add $30,000 or more to your bottom line.
2) Annual increases. You probably need to raise your fees at least annually, even in this economy. To be fair to you and your patients, review your own expenses and the cost of doing dentistry. If those have gone up and you skip a fee increase, that foregone increase lasts forever! As the economy gets back on track, your suppliers will want/need to have a substantial increase in their prices to you to get their revenues back on track. So you probably won't be able to absorb such an increase from your suppliers and catch up for that missed year.
3) Know the CPI. If you don't want to analyze your own specific cost of providing care, then visit the U.S. Bureau or Labor and Statistics Web site. You can also contact the ADA for the annual Consumer Price Index report. By the way, the CPI rose an average of 5% during the last four years. Did you keep up?
4) Unreasonable fear. Even if the doctor is not leery of raising fees, the staff often is. For example, a dentist took on a practice with fees at the 45th percentile, yet the staff insisted that patients would leave if the office raised the prophy fee by $4. Interestingly enough, the staff members expected their annual raises ... which the doctor was giving them. After the fees were raised, they did not lose a single patient and no one even said a word!
Dr. David Martin Reznik, managing partner of Dental Transition Advisors, LLC, insists that it is generally unrealistic to try to avoid insurance all together. Instead, you need to manage insurance and keep it in perspective. He wants everyone to be alert to the matter of “wrong fees.” Wrong fees are best described as those incorrectly billed out from some sort of makeshift or artificial fee schedule that has no basis to the procedures actually performed. They fall into three categories:
• Wrong procedures. What was done was a S&RP, but it was billed out as a “difficult”' prophy either through misdiagnosis, improper coding, or to satisfy the patient's insurance guidelines — i.e., usually to get paid something rather than nothing! Similarly, a perio maintenance visit billed out as a prophy, a four–surface restoration billed out as a three–surface, build–ups billed as bases and liners, etc. These clerical–type errors happen most frequently when the person entering the procedure was not the person present when the procedure was performed. These wrong fees can easily be found through a thorough review of your Procedure Analysis Report. When discovered and corrected, these fees amount to thousands of pure–profit dollars added to the bottom line.
• Wrong amounts. When the fee entered into the system is anything less than the full practice fee, this is usually done because of “discounted” fees related to advertising, contracted fees related to managed care, or courtesy adjustments and professional write–offs related to the doctor being a “nice guy” to virtually everyone who knows his name. Always, always, always (did I say always?) enter the full practice fee for all procedures performed on anyone, including employees and family members. Then categorize all these “adjustments” accordingly to gain a realistic picture of what it really costs to “give away” all this great dental care. Discounting or giving away dentistry as a means of growing the practice is not “free” by any means, and should be appropriately budgeted into the marketing plan or identified with the respective managed–care company for annual comparisons.
• Wrong values. It's easy to spot wrong values when all crown fees are the same regardless of substrate, or all extractions have the same fee, or when procedures are “bundled” together, or as when oral hygiene instruction is included with a prophy. It is indeed a sad state of affairs when the most valuable of dental services have the lowest fees relative to other dental procedures and to health–care services as a whole. Regardless what any fee survey or analysis indicates, as a profession, dentistry still charges too little for diagnostics, too little for prevention, and relative to other health–care providers, too little for surgical procedures. Having said that, it only gets worse when diagnostic and preventive services are frequently given away as a means of advertising ... certainly a dual edged sword if there ever was one! The “hook” in advertising can certainly be other things such as electric toothbrushes or whitening procedures.
We hope you find these global figures interesting, and don't forget to check out your local fees at dentistryiq.com. Remember, there is more to all this than just the “fees”! Click here to view survey.
The Willeford Group has been a different kind of full–service financial planning and management company since 1975. The company handles aspects of the “business of dentistry” with services that range from traditional accounting and taxes, to practice management, transitions, profitability consulting, and wealth–building. Various partners are members of the ADA, AICPA, Academy of Dental Management Consultants, and founding members of the Academy of Dental CPAs, and National Association of Practice Brokers. Contact the Willeford Group by phone at (877) 643–7087, or visit the company's Web site at www.thewillefordgroup.com.
Four action steps to avoid setting the “wrong fees”
- Unbundle procedures from fees
- Give gifts, not valuable services
- Identify and budget all write–offs
- Bill for exactly what was done
These simple action steps will go a long way toward correcting the wrong fee discussion, and add significant performance to the bottom line.